As oil prices plummeted to their lowest level in three years, Alberta Energy Minister Frank Oberle said Tuesday he doesn’t expect major provincial budget cuts this year or a sharp slowdown in the energy sector.

West Texas Intermediate crude slid two per cent to $77.19 US a barrel — the lowest closing price since October 2011 — on Tuesday, a day after energy heavyweight Saudi Arabia cut the price of oil sold into the United States.

“It gives one pause, there’s no doubt about that,” Energy Minister Frank Oberle said Tuesday in an interview. “But you budget with a calendar, not a wristwatch, and there are ups and downs in the market.”

Oberle said the government’s budget last spring — which banked on collecting more than $9 billion in energy revenues this year — came out ahead of expectations during the first six months of the 2014-15 fiscal year, before oil prices began to tumble.

The budget was based on oil averaging $95.22 US a barrel. Every $1-a-barrel drop in prices over the course of the year would cost the Alberta treasury $215 million.

But Oberle noted the Canadian dollar has also dropped, which partially offsets the royalty loss. The margins for heavy crude, such as oilsands bitumen, have also been solid for Alberta, he noted.

“We’re a little bit hedged at the moment. We’re not seeing the full brunt of the price drop,” he said.

The Progressive Conservative government will proceed with “a note of caution,” but Oberle said he did not foresee significant budget cuts in the current fiscal year.

The Peace River MLA acknowledged that if the low prices persist, the impact on royalties will be felt in next year’s budget. But Oberle believes the price of crude has come close to hitting its floor.

The minister said that in his conversations with the energy industry, no one is ringing the alarm bells.

“Nobody is talking about curtailing activity right now and we see applications, we see some real interest in the Alberta market,” he added.

Todd Crawford, senior economist with the Conference Board of Canada, said most energy companies take a long-term view of their plans and aren’t likely to make a snap decision based on the current price.

What should be more concerning for Alberta is the glut of crude produced in the U.S. — Alberta’s dominant foreign customer for oil — that is helping drive prices down, he said.

Gaining access to markets such as Asia becomes all the more crucial, but major pipeline projects remain stalled, said Crawford.

“We just haven’t got there yet and the longer we delay, then of course the more important it becomes, because you start running out of time,” he said.

Robert Kavcic, a senior economist with BMO Capital Markets, said Alberta is expected to remain Canada’s strongest economy even though growth is likely to slow because of lower energy prices.

Kavcic said the government should be looking at adjustments in its budgeting as it faces a royalty shortfall that could reach $2.5 billion, offset partially by the sinking loonie.

But he said Alberta is in decent condition because of its $5-billion contingency fund.

“I don’t think there’s going to have to be a huge policy response right away in terms of like, major spending cuts or anything on the tax side, but they’re definitely going to have to reassess those assumptions,” he said.

Premier Jim Prentice said after his victory in last week’s Calgary-Foothills byelection the decline in oil prices and a continuing lack of access to markets are the two biggest challenges facing the government.

“It is concerning but Alberta is tough and resilient and it is time to demand prudence in terms of our public expenditures and discipline in terms of how we operate our finances,” he said Monday following a meeting with British Columbia Premier Christy Clark.

Opposition MLA Rob Anderson said the government must work with other parties to craft a significant response to the drop in oil prices.

In a low-price environment, the Tory government’s plan to borrow billions of dollars to pay for infrastructure projects will lead to an unsustainable amount of debt, while the province could post annual deficits as high as $7 billion, said the Wildrose finance critic.

“This could erase a lot of prosperity going forward,” Anderson said. “We have to seriously put a plan in place to recalibrate the budget to balance at $75, $80 a barrel.”

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